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Lack of direction persists in the euro

FXstreet.com (Barcelona) - The shared currency remains trapped within the 1.30-1.31 range at the beginning of the week, extending the soft tone since last Friday and with the G20 meeting on Thursday and Friday as the most relevant event. The gathering is not expected to have a high impact on the FX markets, however the recent announcements of the BoJ would be in the centre of attention.

… No news is good news?

The Cypriot front remains unexpectedly quiet so far, with the last news that the island would now need more money than previously though of, perhaps around €23 billion. Capital controls are still prevailing in the economy without any signal of the government halting these distortive measures any time soon.

Italy remains the black hole nowadays, although the Parliament will elect the successor of Giorgio Napolitano as President towards the end of the week. In the meantime, there is not even the slightest hint at some sort of agreement between the three main political leaders at the moment: Bersani, Berlusconi and Grillo. This remains one of the highest hurdle for the euro bulls, as Italy represents the third economy of the bloc, behind Germany and France.

In the meantime, the increasing outflows from the Japanese investors in their quest for yield would remain the sole support for the EUR/USD, bypassing the worrisome fundamentals of the bloc, at least in the near term and as long as the former issues in Cyprus and Italy persist.

From the technical point of view, the region of 1.3115/20 (38.2% Fibonacci retracement of the February-April slide) would be the initial hurdle. Further bullish impulse would target 1.3138/40, where converge the weekly highs and the 55-day moving average, en route to 1.3150 (100-day moving average) and then 1.3231 (50% Fib. retracement).
On the downside, the first relevant support sits at the psychological mark at 1.3000 ahead of the key 200-day moving average at 1.2900/10.

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